Reverse Logistics
Prof P.P.Sengupta
What is meant by integrated
logistics?
• Integrated logistics support (ILS) relates to the
life cycle of a system or product. The system or
product is designed to last longer with less
support and the cost of support is considered
in the product design.
• An Integrated logistics system is designed for
reliability, availability, maintainability and
testability, as well as safety.
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What is inbound and outbound
logistics?
• Inbound logistics refers to the transport, storage,
and delivery of goods coming into a business.
• Outbound logistics refers to the shipment of
products to end users or distribution centres.
• It is associated with the concept of supply chain
management, as managers work to maximize the
efficiency of distribution networks while
minimizing transport and storage costs.
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What is reverse logistics?
• Reverse logistics is the opposite flow of the
standard supply chain.
• The goods move from the end user back to
the seller or manufacturer. It can include
returns from e-commerce and retail, as well as
components for refurbishing and
remanufacturing. The products may be resold
or disposed of permanently.
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When is reverse logistics used?
• Reverse logistics is used when goods are
moved from their final destination to another
location to recapture value or for final
disposal.
• The product may be returned because it
doesn't fit the customer's needs or it has
reached the end of its service life.
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Why is reverse logistics needed?
• Reverse logistics completes the product
lifecycle to support reuse and repurposing of
products and materials. You can recapture
value by reselling items as is, refurbishing
them or selling to a discount liquidator.
• Some materials can be recycled or sent for
final disposal in an environmentally
responsible manner.
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How does reverse logistics
work?
• It starts with a reason for a return, and the
customer contacts the appropriate party to initiate
the return.
• For many retail products, the manufacturer asks
the end user to contact them directly rather than
returning the product to the store.
• The responsible party arranges for transportation
of the returned product, which could involved
sending a shipping label for a parcel pickup, or
arranging for truck pickup for larger items.
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Why is reverse logistics
important to implement?
• The primary goal of reverse logistics is to
recover value from assets to increase revenue
and reduce expenses.
• Establishing a reverse logistics strategy can
also boost the efficiency of a traditional supply
chain by separating the operations.
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What are the types of reverse
logistics?
• Returns
• Returns avoidance
• Remanufacturing
• Refurbishing
• Packaging
• Unsold goods
• End-of-life
• Delivery Failure
• Rentals & leasing
• Repairs & maintenance
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What is returns management?
• Returns management is the supply chain
management process companies use for all
activities associated with returns, reverse
logistics, gatekeeping, and avoidance within
the firm and across all elements of the supply
chain.
• It's the equivalent of managing outbound
shipments.
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What is reverse flow in the
supply chain?
• Reverse flow is another term for reverse
logistics in the supply chain. This includes
planning, implementing and controlling the
efficient inbound flow, as well as the storage
of goods and related information to recover
value or proper disposal.
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What is a closed-loop supply
chain?
• A closed-loop supply chain is one that
generates zero waste.
• All materials are entirely reused, recycled, or
composted. The term includes corporate take-
back programs, where producers of a product
also take responsibility for its disposal.
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What is the difference between a
closed-loop supply chain and
reverse logistics?
• A closed loop supply chain is when you
recover a product from a customer in
exchange for value and recycle the product for
later use.
• Reverse logistics may include a closed loop
system, but it is also the return of items from
consumers or product overstocks as well as
the collection of recyclable materials to
eliminate waste. 13
What is reverse supply chain vs.
reverse logistics?
• Reverse supply chain refers to the movement of goods from
customer to vendor or at least one step backward up the
supply chain. Returning an electric motor from a
commercial supply house back to the manufacturer because
of a packaging defect is an example of reverse logistics that
doesn't involve the end user. This is the reverse of the
traditional supply chain movement of products from the
vendor to the customer.
• Reverse logistics is a higher level perspective that includes
the overall process of planning, implementing and
controlling the inbound flow and storage of secondary
goods and their related information.
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How does reverse logistics
impact supply chain management?
• Companies must plan and execute strategies
to manage products beyond manufacturing
and the final sale. These processes can include
repair, warranty recovery, redistribution, value
recovery, end-of-life recycling or any
combination of these activities.
• Depending on the volume, a separate reverse
supply chain may be established.
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How can reverse logistics
improve supply chain efficiency?
• Creating a reverse logistics strategy allows
outbound and reverse logistics to function as
efficiently as possible.
• Trying to shoehorn reverse logistics into the
traditional supply chain framework can lead to
bottlenecks and customer dissatisfaction.
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What is the reverse logistics
process?
• For example, retailers may bundle pallets of
returned garments for shipment to a liquidator.
• A machine tool manufacturer may accept tools for
re-sharpening and offer a core return discount.
• An e-commerce retailer may accept returned goods
at a separate facility or specific docks for restocking
or liquidation.
• Each item should be tracked with the same level of
visibility and transparency as an outbound
shipment
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What is the difference between
reverse logistics and forward
logistics?
• Forward logistics, or traditional logistics, is about
getting your product to market and uses automated
information systems to track items. The forward
supply chain encompasses product development,
manufacturing, distribution and fulfillment to end
users.
• Reverse logistics is for all operations related to
moving goods from the end user to recapture value
from the products or for proper disposal.
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What are the components of
reverse logistics?
• The three components of reverse
logistics management consist of
– Return Policy and Procedure (RPP),
– Remanufacturing or Refurbishment
(ROR)
– Waste disposal (WAD).
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Return Policy and Procedures (RPP)
• RPP is the company's approach to handling
returns that is shared with customers and
employees that covers aspects such as how
long after purchase a return is accepted, who
is responsible for shipping and whether
there's a restocking fee.
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Remanufacturing or Refurbishment (ROR)
• ROR covers what happens to a return after it
is accepted. Some products like automotive or
manufacturing components are
remanufactured and sold again.
• Some are simply refurbished, such as a
product put into new packaging, or restocked
on the shelves.
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Waste disposal
(WAD )
• WAD comes into play for disposal as
the products are not suitable or not
permitted to be resold after return.
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What are the objectives of
reverse logistics?
• A well-planned, customized reverse logistics
policy can reduce storage and distribution
costs, improve a company's reputation, satisfy
customer needs and create a more sustainable
supply chain.
• Many companies use their return policies as a
competitive differentiator.
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How does reverse logistics work
in the pharmaceutical industry?
• Typically manufacturers control the reverse
logistics flow in the pharmaceutical industry
due to the regulatory concerns for
prescription medications.
• If a product is out of date or is a temperature-
controlled product like insulin that
experiences a temperature excursion, it will be
returned to the manufacturer or its
designated representative for disposal.
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How can reverse logistics
contribute to a lean supply
chain?
• The goal of lean principles is to remove waste from
operations, so reverse logistics is an ideal application
for this philosophy.
• The most effective lean solution would be to design
the product and deliver it so that the customer will
not return it.
• Lean principles can be applied to planning,
implementing and controlling the efficient flow of
materials
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How can reverse logistics
increase customer satisfaction?
• Experts say as much as 20 percent of everything
purchased will be returned.
• Returns are an expected part of commerce today, so
a lack of a comprehensive program will disappoint
consumers, leading to poor reviews and loss of
market share.
• Customers are more apt to purchase if they
understand the return policy, even if they don't
return the product. A return process backed by a
reverse logistics system gives them peace of mind.
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Real-life Examples
• Product Returns: When a customer returns a product to a retailer,
the retailer often sends it back to the manufacturer or a distribution
center for inspection, refurbishing, or resale.
• Recycling Electronics: Many electronics manufacturers and retailers
offer recycling programs for old or broken electronic devices. These
devices are collected, disassembled, and their components are
recycled or disposed of properly.
• Automotive Parts Remanufacturing: In the automotive industry,
used parts like engines, transmissions, and alternators are often
remanufactured to extend their life. These parts are returned to a
facility where they are refurbished and tested before being resold.
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Real-life Examples
• Pharmaceutical Returns: Pharmaceuticals that have expired or are
no longer needed are often returned to the manufacturer for proper
disposal, as improper disposal of drugs can have environmental and
safety consequences.
• Beverage Container Recycling: In some regions, there are deposit-
refund systems where consumers can return empty beverage
containers like bottles and cans to receive a refund. These containers
are then collected and sent for recycling.
• Textile Recycling: Clothing and textiles can be recycled or
repurposed into new products. Companies may collect used clothing
for recycling into new textiles or for resale in thrift stores.
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Real-life Examples
• Packaging Material Recovery: Companies may retrieve packaging materials like
pallets, crates, and plastic wrap from customers or retailers for reuse or recycling.
• End-of-Life Products: When products reach the end of their life cycle, they may be
returned to the manufacturer for proper disposal or recycling. This is common in
industries such as appliances and heavy machinery.
• Hazardous Waste Management: Companies that produce hazardous waste
materials must manage their disposal carefully. Some materials may be returned
to specialized facilities for treatment, recycling, or disposal in compliance with
environmental regulations.
• Core Deposits: In the automotive and industrial equipment sectors, core deposits
are often collected when old parts, like batteries or alternators, are replaced with
new ones. Customers receive a refund when they return the old core part.
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Forward and Reverse Journey of a Strip of
Medicine
• Forward Journey
• Manufacturing: The journey begins at the manufacturing facility where the medicine capsules are
produced. Raw materials such as active pharmaceutical ingredients (APIs), excipients, and empty
gelatin capsules are sourced and processed.
• Packaging: Once the capsules are manufactured, they are typically packaged in strips or blister packs.
These packs are often labeled and then placed in boxes for distribution.
• Distribution: The medicine capsules are then shipped to various distribution centers, wholesalers, and
retailers. This involves transportation through various modes like trucks, planes, or ships, depending
on the scale of distribution.
• Retail: The capsules finally reach the retail pharmacies or stores where customers can purchase them
over the counter or through a prescription.
• Customer Use: Customers buy the medicine capsules and consume them as prescribed by their
healthcare providers. Ideally, the capsules are used for their intended purpose, providing relief from a
medical condition.
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Reverse Journey
• Returns: In some cases, customers may return unopened or unused medicine capsules to the pharmacy
due to factors like expiration dates, medication changes, or overstock.
• Retailer Inspection: The returned medicine capsules are inspected by the retailer to ensure they are in an
acceptable condition for resale. Unopened and undamaged packages may be restocked, while damaged or
opened packages are typically discarded.
• Manufacturer Returns: Some retailers return expired or unsold medicine capsules to the manufacturer for
proper disposal or recycling. This helps in ensuring that expired medications are disposed of safely.
• Recycling: The manufacturer may engage in reverse logistics to recycle materials such as packaging and
unused capsules. Empty gelatin capsules, for example, can be recovered and reused or disposed of in an
environmentally friendly manner.
• Disposal: If the medicine capsules cannot be reused or recycled, they must be disposed of properly,
adhering to environmental regulations and guidelines. This may involve incineration, landfill disposal, or
other approved methods.
• Remanufacturing (Rare): In some cases, pharmaceutical manufacturers may engage in remanufacturing,
where they extract and purify active ingredients from returned or expired capsules for use in new
products.
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